Many large employers appear to have reached the saturation point with employee benefits, and the days of easy pickings in selling voluntary worksite products may be over, industry experts believe.
Case in point: Among 60 worksite carriers surveyed by Eastbridge Consulting Group Inc., Avon, Conn., new sales in 2004 were up just 3% over the year before, to $4.2 billion.
It was the second year in a row Eastbridge found new sales below the double-digit growth rate it had found in earlier surveys.
Another study of 30 carriers by LIMRA International, Windsor, Conn., found sales of two popular worksite benefits were actually down from last year.
LIMRA’s survey, covering the first three quarters of 2005, showed sales of permanent term life and accidental death and dismemberment down 2% and 4%, respectively, from a year earlier. This was after LIMRA’s 2004 survey found sales for those products virtually flat.
The problem may be simply one of oversupply, says Ron Neyer, a LIMRA analyst. Large employers in particular may feel they offer as many voluntary benefits as they can carry.
“If anything, they may be changing carriers, but they have not been offering new benefits,” Neyer says. “The opportunities now appear to be with small employers, those with under 20 workers. A number of carriers now are looking in that market.”
Another factor in the slowdown is the fast rise in the cost of health care, which made some employers leery of bringing in new benefits, even employee-paid ones.
One bright spot LIMRA found was critical illness insurance, which was up 49% in sales volume. Neyer cautions, however, that growth largely reflected a big market push by a few big carriers.
Short-term disability and accident insurance sales were up marginally–2% for STD and 5% for accident.
Although the figures add up to a lackluster year, Neyer points out that double-digit growth rates can’t be sustained indefinitely. Even with a little slippage, voluntary benefits remain at a healthy level, considering the strong growth from 2000 to 2003.
In that period, new worksite benefit sales rose from $3.1 billion to $4.1 billion, while in-force premiums climbed from $8.8 billion to $15 billion, according to Eastbridge.